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While a Harris victory would no doubt ensure smoother negotiations, there’s still Congress to deal with.
Less than a week after election night in the U.S., the United Nations’ annual climate conference begins in Azerbaijan. COP29, as this year’s conference is called, has climate finance and carbon markets on the agenda. It’s no secret that the outcome of the U.S. presidential election could shift the tenor of negotiations significantly on both topics. Everyone knows there’s one candidate who’s better for the climate and one who will be much, much worse.
Even if Harris wins, however, the United States may well continue to shirk its global climate finance obligations. If the U.S. can’t deliver on what it promises at COP29, it may not matter what actually happens there.
Negotiators at COP29 are tasked with setting what’s called the New Collective Quantified Goal on climate finance, a goalpost for the amount of cash governments must put up to meet global climate investment needs. Global South countries excluding China have suggested that they require more than $1 trillion per year in external finance to meet their climate targets. An agreed-upon NCQG will also help all countries flesh out the latest iteration of their national climate plans, also known as Nationally Determined Contributions, as required by the Paris climate agreement.
And yet preliminary discussions over the summer were inconclusive, not just on the NCQG target itself but also on which countries are expected to contribute and what kinds of financing (e.g. public, private, loans, grants) will count toward it. More controversially to some climate activists and civil society groups, negotiators are also using COP29 to finalize a framework for the implementation of Article 6 of the Paris Agreement, which calls for the creation of a global carbon credit market, which countries could use to trade emissions reductions and contribute to each others’ NDCs.
To put it simply: If Donald Trump wins, not much of this will matter. President Biden’s negotiators can still endorse ambitious NCQG and Article 6 targets, but there’s no evidence a second Trump administration will commit to delivering on them. Should Trump win, the U.S. will almost certainly cut itself out of the global climate finance architecture a second time. The Heritage Foundation’s Project 2025 plan, authored largely by Trump associates, not only calls for the U.S. to slash global climate and development funding (as Trump already called for in his first term) but also to withdraw from global negotiating fora entirely. In the breach, Trump administration diplomats will likely stress the importance of gas and non-renewable energy technologies (such as carbon capture) with an emphasis on ensuring domestic energy security and affordability, even as they prepare to gut most if not all of the Inflation Reduction Act and the Bipartisan Infrastructure Law.
A Kamala Harris victory next week will assuredly be much better for both global emissions reductions and the climate diplomacy landscape. While she has outlined no specific proposals for global climate policy in particular, there is also no evidence that she will renege on any U.S. global commitments made in the past four years or attempt to repeal any climate laws.
As president, she will likely preserve President Biden’s key global climate and development policy initiatives, including the Just Energy Transition Partnerships and the Partnership for Global Infrastructure and Investment. She will also likely support the Biden administration’s push to see the multilateral development banks support more investments in climate and development, particularly through mobilizing the private sector. The current World Bank President, Ajay Banga, was nominated by the United States in early 2023 after serving as co-chair of the Partnership for Central America, a private sector-backed economic development initiative launched by Vice President Harris herself as part of her broader engagement with the region. Their shared history suggests that they will continue collaborating on good terms if Harris is elected.
While none of this is directly connected to COP29 (and putting doubts about the efficacy of these programs aside), it speaks to the Biden-Harris administration’s commitment to, at the very least, platforming global climate and development issues. But will Harris actually deliver on the U.S.’s commitments to the NCQG or otherwise meaningfully increase the amount of public spending devoted to global climate and development goals? Probably not ― although in that case, Congress will be the more likely culprit, not her.
Attempts to appropriate additional funds for global climate programs are cursed with a severe case of legislative inertia. Congress did not significantly slash funding for global climate priorities during the first Trump presidency, but it also did not raise it much during the Biden presidency. Last year’s bipartisan debt limit negotiations didn’t help, of course. But even in the early Biden presidency, when Democrats had their narrow trifecta, Congress massively undershot Biden’s budget requests for global climate-related priorities. In fiscal year 2022, Congress passed less than half of what Biden requested; since then, presidential requests for global climate spending have ballooned in size, while appropriations have stayed flat.
This divergence reflects a stable short-term equilibrium: The Biden administration can showcase the full range of its commitments and bona fides and blame Congress for its failure to deliver on any of them, while Congress can coast on the spending cap deals it made to avoid government shutdowns. But it also ignores the planet-sized elephant in the room — that there’s been no new spending on mitigating climate change. Regardless of who is president, there’s only so much discretionary funding they can ever reallocate toward priority programs absent additional appropriations.
(Here it seems pertinent to remind everyone that the U.S. has never endorsed the global consensus framework of “common but differentiated responsibilities,” which would mean acknowledging a quasi-legal obligation to provide climate finance to Global South countries, on account of the fact that Congress has never been enthusiastic about this. The chances that anyone changes their tone are slim.)
In summary, even if Harris comes out on top on Tuesday, the U.S. will still be stuck in a holding pattern with respect to its global climate priorities. This puts the Biden administration’s COP29 negotiators in a vise: Pushing for a low NCQG gives other countries ground to criticize the U.S.’s inadequate ambition and care for the Global South relative to its ability to contribute, but pushing for an ambitious NCQG also gives other countries greater reason to criticize the U.S. if it fails to deliver. Ambition was never the problem; it has always been the delivery.
Optimistically, a Harris victory at least prevents the U.S. from being a roadblock to other countries’ climate action. But at a time when major Global North donor countries are cutting their aid budgets, American unwillingness to finance solutions to global climate and development challenges makes the rest of the world more dependent on private capital and, in turn, more vulnerable to market downturns, interest rate hikes, and capital outflows. (Alternatively, it makes Global South countries more dependent on petrostate wealth and Chinese imports for macroeconomic stability, although they may be less able to count on large Chinese capital inflows from here on out.) As expert report after expert report has detailed, climate change mitigation or adaptation simply will not happen at scale across the Global South without substantial new external financing.
Still, in lieu of new financing, a Harris administration could stress that efforts to catalyze private investment in the Global South (including through voluntary carbon markets) and reform global taxation also contribute to global decarbonization. And it could continue to argue that the U.S. is doing its part to decarbonize if it manages to pass more landmark climate and green industrialization laws like the Inflation Reduction Act. But it would be false to argue ― as President Biden and Treasury Secretary Janet Yellen have done at times, particularly in 2022 ― that the Inflation Reduction Act helps lower the cost of clean tech uptake across the Global South. This is not true — the credit for making clean technology, particularly solar energy, cheaper and more accessible for the Global South goes decisively to China. The U.S. is nowhere close to becoming a major clean technology exporter or a bona fide partner in green industrial transformation for any Global South country, policymakers’ pretensions to the contrary.
One prominent member of Harris’s advisory team, President Biden’s former National Economic Council Director Brian Deese, is trying to change that, advancing ideas like a “Clean Energy Marshall Plan” as an opportunity to deliver on both domestic industrial policy priorities and demands for global leadership vis-a-vis China; his writing exemplifies how American climate diplomacy is being subsumed into national security planning. (Deese is also a Heatmap contributor.) Tactically, this might work in the near-term: The bill to reauthorize the Development Finance Corporation, which would boost the U.S.’s ability to invest in decarbonization-related priorities across the Global South and particularly critical minerals supply chains, cleared the House Foreign Affairs Committee with bipartisan support over the summer. But this is not a strategy that on its own centers the climate and development needs of Global South countries.
So while a Democratic victory next week would certainly be a step toward continued climate action, and while what the Biden administration negotiates at COP29 will at least set a floor for future U.S. commitments (even if that floor is performative), we won’t see a major departure from the status quo unless a Harris administration can convince legislators that American leadership requires a lot more American money.
“We are not going back” ― this much is true. But it would be nice to go forward, too.
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And that’s on top of the constitutional questions.
One of the biggest stories of the new Trump administration is the president’s attempt to block congressionally mandated spending. So far, most of the discussion over this freeze has focused on whether it violates federal law and the Constitution. But another front is likely to open soon in that legal battle — and it has received much less attention.
On his first day in office, Trump froze all federal spending tied to the Inflation Reduction Act and the $1 trillion infrastructure law passed during Joe Biden’s presidency. Although Trump has since relented on other spending freezes — such as a short-lived block on virtually all federal payments — he has continued to withhold these energy, climate, and infrastructure funds, even after a federal judge ordered their release on Monday.
Continuing this freeze for longer than 45 days would take an act of Congress, and it’s unclear whether the Trump administration intends to get one. It seems to be gearing up to fight a Supreme Court battle over whether the president has an inherent “impoundment” authority to block federal funding unilaterally (more on that later).
That constitutional fight will obviously be extremely important. But as hundreds of CEOs and local government officials are now surely realizing, this battle is not the only legal front on which the Trump administration’s spending freeze will be fought.
That is because — as long as the freeze continues — the Trump administration is going to start violating hundreds or even thousands of contracts and legally binding spending agreements. The Trump spending fight is not only about policy and the Constitution, in other words, but also about contract law.
The companies and local governments that are now being strung along by the Trump administration did not make a vague handshake agreement with the Biden administration. Instead, they signed a contract with the federal government to receive a certain amount of money in exchange for doing a certain activity. The administration might have changed since then. But the government is still bound by its debts and obligations.
Those companies have now spent money — in some cases more than tens of millions of dollars — to fulfill their side of the contract. They have bought equipment, purchased land, and hired workers. Those companies’ contracts with the federal government are as legally binding as any other contract between two parties — and the courts are as empowered to defend those contracts as they are any others.
There is a significant amount of money tied up in these agreements. By the end of 2024, the Biden administration had “obligated” more than $96 billion of grants from the Inflation Reduction Act, while the Department of Energy’s loans office had “finalized” more than $60 billion in lending. Both terms generally mean that a contract has been signed.
As Heatmap has written before, just because the government has signed a contract for a certain amount of money doesn’t mean that the money has gone out the door. Many federal contracts are designed, basically, as ongoing invoicing relationships: A private party agrees to do something for the government, the private party does it, and then the private party brings back its receipts and asks the government for reimbursements.
The government has been refusing to make those private parties whole, even though those private parties have kept up their side of their agreements. (Note that at no point, ever, has the Trump administration claimed on the record that the private entities it’s now refusing to pay are in breach of contract. It is simply saying that it would rather not pay them just yet for political reasons.)
This has several important consequences for what is about to happen next.
The first is that the Trump administration is about to face dozens and perhaps hundreds of lawsuits over breach of contract. The president cannot simply announce that the contracts are void, like Michael Scott declaring bankruptcy in The Office. If the president or his officials want to cut off funding to IRA and infrastructure law grant and loan recipients, then they will need to give specific reasons under the contract for terminating and then defend those claims in court — provided that the recipient sues. Under a law called the Tucker Act, companies can sue the federal government for breaching a contract in the Court of Federal Claims, a special court in Washington, D.C. These lawsuits will not be about MAGA policies, but rather about the facts of each contract and whether the parties are in compliance with them.
At the same time, the Trump administration will likely be waging a fight over “impoundment.” Some officials in the Trump administration — including Russ Vought, the Project 2025 architect who now leads the White House budget office — profess that the president has an inherent authority that allows him to unilaterally block federal funding. This is despite the fact that the Constitution does not mention such a capacious authority, and the Supreme Court has historically rejected other presidential ploys, such as President Bill Clinton’s use of the line-item veto, to accept some parts of the federal budget and ignore others.
This will create, at least at first, a two-track legal fight over the Trump administration’s spending freeze. At the high level, President Trump will be fighting over the political and constitutional question of whether he can unilaterally block funding that has been appropriated by Congress. But at the lower level, federal agencies may be sparring with hundreds of companies about whether they can wriggle their way out of the contracts they have already signed. These dozens of potential smaller fights will command an enormous amount of time and personnel attention — not only from the companies, nonprofits, and local governments trying to secure what they are owed, but also from the Trump administration, which has finite resources.
These skirmishes will have economic consequences — and while these might be small in the context of America’s $29 trillion economy, they will gradually deepen. By refusing to honor its contracts, the Trump administration is forcing private companies to bear public costs. Those companies will delay hiring employees and investing in new equipment as they await repayment; some will furlough workers and go bankrupt. The burden will become more and more significant every day that the Trump administration continues its spending freeze.
These costs will not be randomly distributed through the economy, but rather concentrated primarily in sectors located in rural areas and affecting working-class Americans. Professional environmentalists in Seattle will continue to have a job regardless of what happens to some rural school district’s microgrid project. But the construction workers and electricians set to build that grid will lose income.
For this reason, the energy and infrastructure freeze does not strike me as a very wise move, politically — particularly as U.S. economic sentiment is worsening. One reason it is politically prudent for lawmakers, and not the president, to make spending decisions is that representatives understand their districts much better than federal officials in Washington, D.C.
This suggests the final takeaway: The Trump administration is beginning to play a very dangerous game with the United States. The American economy’s strength and prosperity arises from its territorial resource wealth, its educated and productive workforce, its secure defensive position, and — crucially — a set of financial intangibles that are ultimately backed up by federal contracts. The federal government is the largest counterparty in the global economy because it can be relied upon to pay its debts. If it begins to back out of contracts hither and thither, especially if primarily for partisan political reasons, then it will ultimately damage every American.
This is not a new or novel thought. Writing in 1790, Treasury Secretary Alexander Hamilton said that the “punctual performance of contracts” was the key to maintaining the United States’ good credit. “States, like individuals, who observe their engagements, are respected and trusted: while the reverse is the fate of those who pursue an opposite conduct,” he said. “Every breach of the public engagements, whether from choice or necessity, is in different degrees hurtful to public credit.”
It isn’t unusual for new administrations to pause some spending at the beginning of their terms, and perhaps the Trump administration will soon prove the worriers wrong and lift the spending freeze. But I fear it will not. It is very possible that in the next several months, the administration will begin to breach dozens of its public engagements. This will hurt the energy, automaking, and construction sectors in the near term. It will cause grief for the president — and, I worry, all of us — soon after.
Core inflation is up, meaning that interest rates are unlikely to go down anytime soon.
The Fed on Wednesday issued a report showing substantial increases in the price of eggs, used cars, and auto insurance — data that could spell bad news for the renewables economy.
Though some of those factors had already been widely reported on, the overall rise in prices exceeded analysts’ expectations. With overall inflation still elevated — reaching an annual rate of 3%, while “core” inflation, stripping out food and energy, rose to 3.3%, after an unexpectedly sharp 0.4% jump in January alone — any prospect of substantial interest rate cuts from the Federal Reserve has dwindled even further.
Renewable energy development is especially sensitive to higher interest rates. That’s because renewables projects, like wind turbines and solar panels, have to incur the overwhelming majority of their lifetime costs before they start operating and generating revenue. Developers then often fund much of the project through borrowed money that’s secured against an agreement to buy the resulting power. When the cost of borrowing money goes up, projects become less viable, with lower prospective returns sometimes causing investors not to go forward .
High interest rates have plagued the renewables economy for years. “As interest rates rise, all of a sudden, solar assets that are effectively bonds become less valuable,” Quinn Pasloske, a managing director at Greenbacker, a renewable investor and operating company, told me on Tuesday, describing how the stream of payments from a solar project becomes less valuable as rates rise because investors can get more from risk-free government bonds.
The new inflation data is “consistent with our call of an extended Fed pause, with only one rate cut in 2025, happening in June,” Morgan Stanley economists wrote in a note to clients. Bond traders are also projecting just a single cut for the rest of the year — but not until December.
Federal Reserve Chair Jerome Powell told the Senate Banking committee Tuesday, “We think our policy rate is in a good place, and we don’t see any reason to be in a hurry to reduce it further.”
The yield for the 10-year Treasury bond, often used as a benchmark for the cost of credit, is up 0.09% today, to 4.63%. While this is below where yields peaked in mid-January, it’s a level still well above where yields have been for almost all of the last year. When Treasury yields rise, the cost of credit throughout the economy goes up.
Clean energy stocks were down this morning — but so is the overall market. Because while high interest rates are especially bad for renewables, they’re not exactly great for anyone else.
Current conditions: Los Angeles is bracing for a massive rain storm that could trigger landslides in areas recently charred by severe wildfires • About 90% of districts in India have received little or no rainfall since the start of the year • Schools are closed in Kansas City, Missouri, where up to 6 inches of snow is expected today.
California’s state-backed insurance plan of last resort is short on funds to pay out claims from the Los Angeles wildfires. As a result, California Insurance Commissioner Ricardo Lara is asking private insurers that operate in the state to give the program, known as the FAIR Plan, $1 billion. The FAIR Plan is for people who can’t get private insurance coverage because their properties are considered high risk. As weather disasters get worse and private insurers pull back from the state, more people are relying on the FAIR Plan, and its policy load has doubled since 2020 to more than 452,000. The plan has received some 4,700 claims related to last month’s devastating fires, and paid out more than $914 million. But that’s not enough. The program expects a loss of $4 billion from the fires. This is the first time in 30 years that the program has needed to ask for more money. The fee will be divided between the private companies according to market share, and they’ll have 30 days to pay. Up to half of the cost can be passed on to their own policyholders. Even so, there are concerns that this will push private insurers to leave California to avoid further losses, exacerbating the state’s insurance crisis. State Farm, the state’s largest insurer, recently asked regulators to approve a 22% rate increase.
The U.S. added nearly 50% more clean energy capacity last year than in 2023, according to a new report from energy data company Cleanview. Most of the 48.2 gigawatts of new capacity came in the form of batteries and solar, with solar additions rising by 65%, mostly in southern states like Texas and Florida. As for battery storage, four states (California, Texas, Arizona, and Nevada) accounted for 70% of new capacity. Meanwhile, wind power missed out on growth, with capacity additions dropping by nearly a quarter year-over-year. The report says solar growth will likely slow down in 2025, battery storage could grow by nearly 70%, and wind capacity could grow by 80% if all planned projects manage to reach completion. One interesting tidbit is that Indiana is emerging as a solar hot spot. It ranks third on the list of states with the most solar additions planned for 2025, below Texas and California, but above Arizona. Of course, a lot will depend on the Trump administration.
Cleanview
Global air traffic rose by 10% to an all-time high last year, according to recent data from the International Air Transport Association. This means more aviation pollution. Air travel already accounts for 2.5% of global energy-related carbon dioxide emissions, and has contributed an estimated 4% to global warming. As Ben Elgin at Bloombergnoted, the rise in air travel comes as airlines fail to adopt “sustainable” aviation fuel at meaningful levels, with SAF accounting for a paltry 0.3% of commercial jet fuel production in 2024. “SAF volumes are increasing, but disappointingly slowly,” the IATA said in December. “Governments are sending mixed signals to oil companies which continue to receive subsidies for their exploration and production of fossil oil and gas.” Airlines are relying on SAF to curb their emissions, with many pledging to consume 10% SAF by 2030. But “even if airlines can somehow replace 10% of their fuel with lower-emitting alternatives by the end of the decade, those climate benefits would be wiped out by the industry’s expected growth,” wrote Elgin. Yesterday the Trump administration released a $782 million loan for a plant in Montana to turn waste fats into biofuel. The loan was originally finalized under the Biden administration.
The CEO of Ford Motor yesterday warned that the company could be forced to lay off workers if President Trump raises tariffs on Mexico and Canada, and guts Biden-era legislation that supported electric vehicle production. “A 25% tariff across the Mexico and Canadian border will blow a hole in the U.S. industry that we have never seen,” Jim Farley said at a conference. He added that ending loans and subsidies for EV manufacturing projects would also put many Ford jobs at risk. The New York Times noted that his comments “offered a rare example of a corporate executive calling into question Mr. Trump’s policies or statements.”
Sales of electric vehicles were up 18% in January compared to the same time in 2024, but growth is slowing, according to research firm Rho Motion. Last month, 1.3 million EVs were sold worldwide. That’s down 35% from December’s numbers, and marks the third month in a row of slowing growth. China’s sales were down last month because of the Chinese New Year. Meanwhile, sales were up in Europe as new emissions standards came into effect. And in the U.S. and Canada, sales rose 22%. Rho Motion expects more than 20 million EVs will be sold this year.
$160 million – The amount raised in a Series B funding round by Chestnut Carbon. The startup focuses on planting trees and vegetation, and improving forest management practices to better remove carbon from the atmosphere. Chestnut will use this latest funding to build out afforestation projects — that is, planting trees in areas where, at least in modern times, forests have not existed.
Editor’s note: This story has been updated to clarify the nature of the Trump administration’s actions on funding for a Montana biofuels plant.